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Problems & Solutions

Tax Incentives for Environment-friendly Commercial Vehicles

Background

Qualifying Standard for Environment-friendly Commercial Vehicles


Details of the Tax Concession Scheme

Environment-friendly Commercial Vehicles

a. Environment-friendly commercial vehicles imported by authorized vehicle dealers and type-approved by EPD

b. Environment-friendly commercial vehicles imported by parallel importers or individuals

Validity of "Environment-friendly Commercial Vehicle Certificate"

How to apply for the first registration tax concession for an Environment-friendly Commercial Vehicle?

Profits Tax Deduction for Capital Expenditure on Environment-friendly Vehicles

Enquiry

 

 


Tax Incentives Scheme for Environment-friendly Commercial Vehicles

Vehicular emissions are the major source of roadside air pollution in Hong Kong. Reducing emissions from vehicles can improve our roadside air quality. To encourage the use of environment-friendly commercial vehicles, which have low emissions, starting from 1 April 2008, reduction in the First Registration Tax (FRT) will be offered to buyers of newly registered environment-friendly commercial vehicles. Vehicle owners buying environment-friendly commercial vehicles can enjoy tax concessions and make an effort to protect the environment.

 

Qualifying Standard for Environment-friendly Commercial Vehicles

Specifically, environment-friendly light duty commercial vehicles (i.e. those weighing not more than 3.5 tonnes) are required to emit at least 50 per cent less than the prevailing statutory emission limits. As for environment-friendly heavy duty commercial vehicles, their emission performance should be better than the average emission levels.

The qualifying standard for environment-friendly commercial vehicles taking effect on 1 April 2013 are set out below.

Table 1. For environment-friendly light duty commercial vehicles

Reference Mass
of
Light Duty Vehicles
(Design Weight
less than or
equal to 3.5 tonnes)
Emission
Less than (g/km)
Euro
Under NEDC Test Cycle
Nitrogen Oxides (NOx)
Particulate
Compression-Ignition Engines fuelled with diesel
Positive-Ignition Engines fuelled with petrol or liquefied petroleum gas
RM < 1305
0.09
0.03
0.0025
1305 < RM < 1760
0.1175
0.0375
1760 < RM
0.14
0.041

 

Table 2. For environment-friendly heavy duty commercial vehicles

Category
of
Heavy Duty Vehicles
(Design Weight
more than
3.5 tonnes)
Emission
Less than (g/kWh)
Euro
Under ESC Test Cycle
Nitrogen Oxides (NOx) Note 1
Particulate Note 1
LGV (>3.5T)
1.64 (-18%)
0.004 (-80%)
MGV
1.64 (-18%)
0.012 (-40%)
HGV
1.73 (-14%)
0.017 (-15%)
Bus
1.62 (-19%)
0.011 (-45%)
Light Bus
1.41 (-30%)
0.007 (-65%)
SPV
1.62 (-19%)
0.006 (-70%)

Note 1: The figures in brackets are the emission reduction as compared with the Euro V standards.

The Environmental Protection Department (EPD) reviews the qualifying standards annually in the light of technological advancement and the prevailing statutory emission standards. The objective is to ensure that tax incentive is available only to vehicles of outstanding emission performance outstripping the prevailing statutory requirements. If tightened, the new qualifying standards become effective on 1 April of the following year.

 

 

 

Details of the Tax Concession Scheme

Under this tax concession scheme, "commercial vehicles" include taxis, light/medium/heavy goods vehicles, public/ private light buses, public/ private non-franchised buses and special purposes vehicles.

The rates of reduction of the first registration taxes for different vehicle classes qualified under the scheme are as follows–
(a) 100% for taxis, light buses, non-franchised buses and special purpose vehicles;
(b) 50% for goods vehicles (except van-type goods vehicles up to 1.9 tonnes permitted gross vehicle weight); and
(c) 30% for van-type goods vehicles up to 1.9 tonnes permitted gross vehicle weight.

The tax concessions are subject to vehicle-class-specific caps per vehicle. For details, please see the table below.

Table 3. First Registration Tax Concession Rates and Caps for Environment-friendly Commercial Vehicles

Vehicle Classes

First Registration Tax Rate (% of vehicle taxable value)

First Registration
Tax Waiver (%)

First Registration Tax Concession Cap ($ per vehicle)

Light Goods Vehicles (vans)
(weight1 not exceeding
1.9t)

352

30

8,500

Light Goods Vehicles (vans)
(weight more than 1.9t, but not exceeding 5.5t
)

17

50

40,000

Light Goods Vehicles
(non vans)
(weight not exceeding
5.5t)

15

50

29,000

Medium Goods Vehicles (weight more than 5.5t but not exceeding 24t)

15

50

56,000

Heavy Goods Vehicles
(weight more than 24t)

15

50

69,000

Non-franchised Buses

3.7

100

78,000

Light Buses

3.7

100

27,000

Taxi

3.7

100

12,000

Special Purpose Vehicles

3.7

100

63,000

1. The "weight" means "permitted gross vehicle weight".

2. The first registration tax rates of van type goods vehicles weighing up to 1.9 tonnes are 35% on the first $150,000 of vehicle taxable value, 65% on the next $150,000 and 85% on the remainder.

 

3. The tax concessions for newly registered environment-friendly commercial vehicles of the above vehicle classes are subject to vehicle-class-specific caps per vehicle. The FRT payable is based on the following calculation method:
(a) If FRT concession is less than FRT concession cap, FRT payable = [vehicle taxable value x FRT rate x (1-FRT waiver)];
(b) If FRT concession is greater than FRT concession cap, FRT payable = [vehicle taxable value x FRT rate] – FRT concession cap.

For those vehicle owners who opt for environment-friendly commercial vehicles to replace their Euro II diesel commercial vehicles under the one-off grant scheme that was launched on 1 July 2010, they are entitled to the above first registration tax waiver taking account of the additional environmental benefits of procuring more environment-friendly commercial vehicles. Please note the deadlines for replacing Euro II diesel commercial vehicles under the one-off grant scheme.

 

Environment-friendly Commercial Vehicles

Environment-friendly commercial vehicles can be imported either by dealers authorized by vehicle manufacturers (i.e. authorized vehicle dealers), parallel importers or individuals. Details are as below:

 

(a) Environment-friendly commercial vehicles imported by authorized vehicle dealers and type-approved by EPD.
Vehicle manufacturers have provided sufficient information to prove to the satisfaction of EPD the compliance of these vehicle models with the environment-friendly commercial vehicle qualifying standards. EPD has thus issued to each of the vehicle models an "Environment-friendly Commercial Vehicle Certificate" such that vehicles of the same model imported by the relevant vehicle manufacturer via his authorized vehicle dealer are also environment-friendly commercial vehicles (i.e. type-approved to be compliant with the environment-friendly commercial vehicle qualifying standard).

A vehicle buyer in consideration of buying an environment-friendly commercial vehicle should ask the authorized vehicle dealer for the "Environment-friendly Commercial Vehicle Certificate" issued by EPD for the vehicle model.

Below is a list of environment-friendly commercial vehicle models that have been type-approved by EPD. The list will be updated when new environment-friendly commercial vehicle models have been type-approved by EPD.

Table 4: Environment-friendly commercial vehicle models which have been type approved by EPD and meeting the current qualifying standards valid till 31 March 2015

 

(b) Environment-friendly commercial vehicles imported by parallel importers or individuals
Vehicles manufactured for different places may be designed to meet different emission standards and have different options for purchase which can affect their emission performance. Thus, vehicles of the same model name can be designed to meet different emission standards. Evidence should be submitted to the EPD for each of the vehicles imported by parallel importers or individuals to substantiate their compliance with the environment-friendly commercial vehicle qualifying standard. Since these vehicles are imported on an individual basis, EPD will issue an "Environment-friendly Commercial Vehicle Certificate" to each of them.

A vehicle buyer in consideration of buying such a vehicle should ask for the valid "Environment-friendly Commercial Vehicle Certificate" issued by EPD for the vehicle. The Certificate will bear details of the vehicle including engine number, chassis identification number and vehicle model and the validity period of the certificate.

Note: Any vehicle without a valid "Environment-friendly Commercial Vehicle Certificate" issued by EPD will not be eligible for the FRT reduction for environment-friendly commercial vehicles, irrespective of whether the vehicle is imported by an authorized vehicle dealer, a parallel importer or an individual.

 

Validity of “Environment-friendly Commercial Vehicle Certificate”

Since EPD will review the environment-friendly commercial vehicle qualifying standard annually for tightening them in the light of technological advancement, the "Environment-friendly Commercial Vehicle Certificate" has a validity period. Upon its expiry, the vehicle concerned will lose its eligibility for the FRT concession if it cannot comply with the new qualifying standard at that time. Thus, vehicle owners or vehicle vendors should submit the first registration application to Transport Department (TD) during the validity period of the relevant "Environment-friendly Commercial Vehicle Certificate" to benefit from the FRT concession.

 

How to apply for the first registration tax concession for an Environment-friendly Commercial Vehicle?

With effect from 1 April 2008, a vehicle owner applies with TD for first registration of his commercial vehicle, which is compliant with the qualifying standard for environment-friendly commercial vehicles and have a valid "Environment-friendly Commercial Vehicle Certificate" at the same time will have the FRT reduction, subject to the vehicle-class-specific cap.

(a) Environment-friendly commercial vehicles imported by authorized vehicle dealers and type-approved by EPD.
An authorized vehicle dealer submit the first registration application for a new vehicle of a specific vehicle model to TD shall produce the valid "Environment-friendly Commercial Vehicle Certificate" for that type-approved vehicle model issued by EPD.

(b) Environment-friendly commercial vehicles imported by parallel importers or individuals
A vehicle owner submit the first registration application for his new vehicle to TD shall produce the original copy of the valid "Environment-friendly Commercial Vehicle Certificate" of that vehicle issued by EPD.

Note: In addition to the above requirements, vehicle dealers or owners shall also complete all the existing procedures for vehicle first registration and produce necessary documents to the departments concerned. Longer processing time would be required to confirm information on vehicles and the level of eligible concession rates.

 

Profits Tax Deduction for Capital Expenditure on Environment-friendly Vehicles

Starting from 18 June 2010, businesses which have purchased eligible environment-friendly vehicles may deduct the capital expenditure incurred under profits tax.

Profits Tax Deduction for Capital Expenditure on Environment-friendly Vehicles

 

Enquiry

For enquiries about the environment-friendly commercial vehicle tax concession scheme, please contact the following departments:
EPD (for enquires about environment-friendly commercial vehicle models and details of the scheme)
Tel: 2594 6392
Fax: 2824 9361
Address: RevenueTower, Wanchai, Hong Kong, Environmental Protection Department Mobile Source Group.

TD (for enquiries about the FRT reduction rates)
Tel: 2804 2600
Address: Hong Kong Licensing Office, Transport Department, 3/F, United Centre, 95 Queensway, Hong Kong.
Webpage: http://www.td.gov.hk/home/index.htm

Inland Revenue Department (for enquires about the profit tax deduction for capital expenditure on environment-friendly vehicles)
Tel: 187 8088
Address: Revenue Tower, Wanchai, Hong Kong.

Webpage: http://www.ird.gov.hk/eng/faq/efv.htm

 

 
 
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Tuesday, 20 May, 2014